IDFC First Bank shares rally after highest-ever profit in Q1. Should you buy?

IDFC First Bank‘s net interest income (NII), which is the difference between interest earned and interest expended, grew by 26% to ₹2,751 crore in Q1FY23 whereas the net interest margin (NIM) improved to 5.89% from 5.50%.

The asset quality of the bank showed improvement as the gross non-performing assets (NPAs) fell to 3.36% of the gross advances in the June 2022 quarter against 4.61% a year ago. The net NPAs too came down to 1.30% from 2.32%.

“IDFC FIRST Bank’s (IDFCFB) Q1FY23 earnings were much ahead of I-Sec and consensus expectations with PAT growth of 38% QoQ. Core operating profit trajectory at Rs10bn (up 18% QoQ/64% YoY) gives confidence of targeted RoA/RoE, after having delivered RoA,” said ICICI Securities in a note.

IDFC First Bank is confident of its guidance of <2% retail GNPA and <1.5% credit cost in FY23. Current RoE profile is burdened by high cost structure, loss in retail liabilities and credit card business, highlighted the brokerage which has maintained its buy tag on the bank stock with an unchanged target price of ₹59 per share and sees an elevated cost structure as key risk.

“We have posted the highest ever profit after tax of ₹474 crore in Q1FY23. Our return on assets has nearly touched 1 per cent and we expect it to rise from here,” V Vaidyanathan, Managing Director and CEO, IDFC FIRST Bank said.

IDFC First Bank shares are down more than 21% in 2022 (year-to-date or YTD) so far, whereas, the counter has declined about 25% in a year’s period.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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